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INDIANAPOLIS, Ind. – “This has been the most disruptive time we’ve seen in domestic transportation.”

Those words, spoken by John Janson, director of global logistics for Sanmar, were spoken at the FTR Transportation Conference this morning, and echoed by many of his shipper peers.

“I’m not seeing anything in the near future that’s going to change that,” he added. The electronic logging device (ELD) mandate in the U.S. coincided with strong demand for transportation services, which put pressure on capacity and enabled carriers to push through sizeable rate increases.

“One challenge we’ve really seen and continue to focus on is accessorial charges,” Janson said. “There is a higher premium on a driver’s time and that asset utilization. Shippers used to have the opportunity to take advantage of trailers for storage, now all the focus is on turn time, how fast can you get that equipment back into the marketplace? You have to be able to start shaping your company and your operations to accommodate that.”

Don Daseke, chairman and chief executive officer of Daseke Inc., acknowledged business is good – especially in the flatdeck segment.

“I think we could be in for a long cyclical strength of the flatbed specialized market,” he said. “Part of the reason for that strength is the ELDs certainly contracted capacity a bit. The second factor is, there are really no flatbed companies of size that are adding capacity. If you have fixed capacity of flatbed specialized equipment and strong industrial demand, which there is, you likely have a long-term tight market for flatbeds.”

Higher wages will be required to find the drivers willing to do flatbed work, Daseke predicted.

“What I think has to happen over the next five years, is the average driver making $60,000-$65,000 this year, five years from now will be making $100,000 a year, because how do you attract drivers to a job that has inherent disadvantages? You attract them by paying them enough money to lure them away from other jobs,” Daseke said.

Thom Albrecht of Celadon said business is also booming in the dry van segment, with freight growth outpacing GDP – a rare occurrence, which he said happens about once a decade. He said current market conditions have allowed carriers to bake time into their pricing mechanisms, and this will continue going forward.

Jeff Tucker, CEO of freight broker Tucker Company, said opportunities are being created for small fleets that can market themselves to drivers with perks such as no forced dispatch policies and family environments, and a focus on driver-friendly freight.

“Retailers that allow their operations to hold drivers for six to 16 hours is abusive in today’s environment and it happens every day in retail,” said Tucker. “This economy in trucking allows choices, and choices allow you to pick up and go somewhere else.”

This ability for drivers to easily move on has led carriers to take steps to better retain their professional drivers.

“Trucking companies do stupid stuff,” Celadon’s Albrecht admitted. “We have made a number of changes at Celadon.”

For example, drivers were previously offered a pay premium if they worked over the U.S. Thanksgiving holiday – but were not paid if their truck broke down and kept them sidelined. Now, Albrecht said, drivers are paid the premium even if their truck is down.

“Drivers start talking, ‘Hey, they’re going to take care of you.’ You just have to be respectful of people,” he said.

The trucking industry’s growth is currently among small fleets, and shippers are looking to these fleets to fill niche lanes as “one lane wonders.”

“If you have some dedicated runs like we do, and if you can match them with a niche carrier where that lane becomes meaningful to them, it’s a great opportunity,” said Janson. “Last year we added three different sets of one lane wonders where my transportation team has put their sales hats on and they’re out finding these carriers.”

Lee Klaskow, senior analyst with Bloomberg, expects trucking rates to continue to rise, with contract rate increases hitting the mid-teens by the end of the year.

“Our view is that rates will continue to climb from here,” he said.

Janson worries there will be continued pressure on rates.

“As we head into 2019, we are still hearing expectations for high single digit numbers for rate increases,” he said. “It puts an inherent pressure on the shipper to say, what can we control? If we can make ourselves more desirable customers, we believe that will be directly reflected in rates we’re doing with long-term carriers. We are really focused on what we can control. It doesn’t look any brighter for shippers in upcoming months and upcoming years.”

Daseke agreed that shippers should work with their carriers to eliminate waste from the system, but added there are limitations to how much this can achieve.

“In order to pay our drivers more, the shippers are going to have to bear the price of attracting drivers to the flatbed business. And that pressure I don’t think is going to lessen. We can all try to be more efficient and we do that and urge our shippers to be more efficient in the way we can turn around equipment at their premises, but there’s only so much you can do there,” Daseke said.

James Menzies

James Menzies is editor of Truck News magazine. He has been covering the Canadian trucking industry for more than 15 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies. All posts by James Menzies